January 2016 - Out of the Woods

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TH E M R EP O RT
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SERVICING
THE LATEST
revised Basel III capital rules that
went into effect this year are now
limiting the amount of an MSA
that can be counted toward this
total. Also under the new regula-
tory environment, the MSA's risk-
weight included in the capital will
spike by about 2.5 times.
"These two changes—limiting
an MSA's use as regulatory capi-
tal and increasing the asset's risk
weight—make it more challenging
for banks to achieve target capital
ratios, especially in the required
CCAR and DFAST stress tests.
At present, these changes don't
appear to place the largest banks
at risk of falling below their
target capital levels," the Freddie
Mac report stated.
"However, some mid-sized
banks with large mortgage opera
-
tions may have to reduce their
holding of MSAs, increase their
holdings of other types of capital,
or reduce their assets to maintain
their desired capital ratios."
Those three factors have
resulted in the following changes
in the structure of the servicing
industry, according to Freddie
Mac:
• A reverse in the decades-long
trend of consolidation. Smaller
servicers now handle the
majority of mortgage servicing.
In 2001—seven years before the
crisis—the top five servicers
handled 37 percent of servic
-
ing; at the peak of the crisis in
2009, that share swelled to 59
percent. By 2015, it was back
down to 40 percent.
• An increase in the share of
mortgage servicing handled by
nonbanks. Among the top 20
servicers in 2009, nonbanks
accounted for 9 percent of the
servicing; that share had more
than doubled—up to 19 per
-
cent—five years later in 2014.
• Growth in subservicing, and
specialty servicing has become
a significant sector in servicing
overall. Some of the sub-areas
in which subservicing is be-
coming increasingly specialized
are servicing non-performing
loans, servicing loans that are
likely to be modified, or focus-
ing on loans that are likely to
end in foreclosure, according to
Freddie Mac.
CFPB Complaints About
Ocwen Decline, While
Nationstar's Rise
Mortgage grievances outweigh debt collection,
credit reporting, and more.
T
he November volume
of the Consumer Fi-
nancial Protection Bu-
reau's (CFPB) monthly
complaint snapshot highlight-
ed one of its top three most
complained-about financial
products: mortgages.
In October 2015, the Bureau
received 24,300 complaints, and
4,685 of these were mortgage-re-
lated, making it the third most
complained-about category from
August to October 2015. During
the same period last year, mort-
gage complaints totaled 4,317.
Mortgages were most
complained about at Ocwen
and Nationstar Mortgage,
occupying nearly all of the
CFPB's complaints for October.
However, Ocwen's complaints
have fallen 16 percent overall
from August to October 2014 to
the same period this year, while
Nationstar's complaints have
risen 11 percent. Wells Fargo,
Bank of America, and JPMorgan
Chase also had a significant
number of mortgage-related
complaints.
Ocwen Financial
Corporation recently made
headlines when the com
-
pany failed four metrics and
was deemed to have failed
seven others in an independent
settlement monitor's review of
its residential mortgage loan
portfolio for the second half of
2014, according to the monitor's
report filed with the U.S. Court
for the District of Columbia.
But one reason for the turn
-
around in complaints could be
that Ocwen is addressing the
issues that the monitor pointed
out.
"The monitor's report con
-
firms continued confidence by
the OMSO (Office of Settlement
Mortgage Oversight) in the
changes we have made to our
Internal Review Group func
-
tion, the qualifications and
process around our metrics
testing, and discusses our state
of compliance with the National
Mortgage Settlement," Ocwen
spokesman John Lovallo said in
an email to MReport. "The spe
-
cific metrics mentioned in this
report are from the third and
fourth quarters of 2014, and not
a reflection of our current op
-
erations. They have all been ad-
dressed with Corrective Action
Plans approved by OMSO and
implemented by Ocwen in 2015.
We also note that the monitor's
report specifically discusses that
Ocwen has cured its potential
violation regarding termination
of lender-placed insurance and
passed that metric during the
cure period in the fourth quar
-
ter of 2014."
He continued: "Ocwen
is committed to being fully
compliant with all rules and
regulations related to our busi
-
ness, and we continue to invest
in our risk and compliance
management systems. We will
continue to work closely with
the monitor and look forward
to the next report."
Nationstar also made head
-
lines when the company agreed
to pay $77 million to settle class-
action suits filed by homeown-
ers over the alleged inflating of
insurance rates, according to
media reports.
The Nationstar settlement,
combined with a similar
lawsuit against Ocwen Loan
Servicing (part of Ocwen
Financial Corp.) that was settled
in September, mean the two
servicers will pay a combined
total of $217 million to more
than 1 million homeowners.
On a positive note, the
CFPB reported that mortgage
complaints fell 0.6 percent
from the prior month. Overall
complaints are up 6 percent
month-over-month.
In total, the CFPB has
handled about 749,400
complaints as of November 1,
2015. According to the report,
mortgage complaints totaled
201,946, the highest complained
item thus far, followed by debt
collection and credit reporting.
"Debt collection, credit
reporting, and mortgage
complaints continue to be the
top three most-complained-
about consumer financial
products and services,
collectively representing about
66 percent of complaints
submitted in October 2015, the
report stated.
According to the CFPB,
Idaho, Arkansas, and Nebraska
have the highest complaint
volume increases year-over-year
at 66 percent, 42 percent, and 41
percent, respectively. The lowest
complaint volume percentage
increase came from Alaska (-12
percent), Delaware (-5 percent),
and Florida (1 percent), the data
showed.